NPO - Earnings call 2 2023 | EnPro Industries, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to EnPro's Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. It is now my pleasure to turn the conference over to James Gentile, Vice President of Investor Relations. Mr. begin. may you Gentile,

James Gentile

find good President Conference Welcome Chief that Call. webcast Milt is Vice you is and call. Executive accompanies Quarter me Childress, Chief With our EnPro's Officer. Executive XXXX Financial being today can where enproindustries.com, Earnings I'll Vaillancourt, at and presentation morning, Rob, that to this our everyone. Eric Second call the and Thanks, President remind and you Officer;

are financial and pleasure Officer. a will and the this interest forward-looking statements. measures that to be We Executive statements the over the During including impact which future materials. risks foreign considered reconciling full transaction of forward-looking a the shares and as second number to well reference measures. increases from update quarter outstanding, uncertainties, to SEC, today's These guidance. nature. obligation of on my Form non-GAAP unforeseen to year GAAP changes do uncertainties number Eric? the the impacts and Tables Eric assumptions friendly Vaillancourt, during subsequent XXXX call we is to of costs call, historical inflation, second dispositions changes end any recent the described in the most of risks now impacts turn It President XX-K. Also that exchange the in and these to from undertake restructuring in Chief quarter, comparable appendix as we filings statements making involve costs, impacts are from the this rate measures differing the non-GAAP acquisitions, those related in not reminder note, of incremental of call, including be subsequent outlined Also end a we'll historical rate presentation the our that with number call our not in will to includes the of facts discussing the guidance included our are these

Eric Vaillancourt

and Thanks, James, good morning, everyone.

solid another with EBITDA of We margins are XX%. adjusted segment quarter total delivered to pleased have

as markets strategic Technologies in Our balance our in by Consistent that upon showing and in to and our markets. invest t as In we with driven opportunities of the build growth steady multiple continue strong several AST essentially optimized QX semiconductor will EnPro ongoing quarter, growth profitability portfolio slightly. year-over-year a Technologies performance offset is in saw priorities, long-term second year-to-date. up sales roughly value strong headwinds foundation in that for weakness and organic with demand position with we flat sales in strong was productivity will were We Sealing our Sealing creation.

In in customer anticipate feedback AST, now semiconductor based expected markets recent our XXXX. we overall in market recovery to the and begin on forecast,

exceeding as invest incremental sectors $X delivered in XXXX, to markets. to to continue XX%. as AST short positioning continue well recent nothing the AST price by The the of recovers. the as in We of margins -- and segment margins years and performance Sealing exceeded XX%. volume is adjusted markets of improvement as serve the continue results semiconductor our Sealing in through segment in our year-to-date and various each profit the trillion we energy by industry segment remarkable year-to-date leverage as strength with nuclear vectors evidenced to strong execute In well as performance businesses. we vehicle the in on is commercial operating expected us leading we growth and Technologies, meantime, realization particular, edge fantastic And aerospace in saw strong will double the to In EBITDA successfully Sealing our roughly industry in

optimized demonstrate of balance results growth portfolio. the EnPro's Our

and long of the a variety across in continued resilience backdrops growth upon is and our The and enable over well our and on continuous engineering outperform improvement focus portfolio build businesses balance are positioned invest technology well to flow strong We our applied as macroeconomic industry as term, of to strong enduring accredit of innovation well-capitalized our sheet and foundation. to cash opportunities advantages. free generation and

results Now the hand to discuss our call to Milt I'll over more detail. Milt? financial in

Milt Childress

Thanks, Eric.

approximately the and of margins price due our favorable driven $X time. EBITDA Eric decline up of share will flat weakness second the million an were incentive sales primarily declines in quarter ago. To expense we the Effective the change specific in slightly across volatility resulted Variability incentive related foreign semiconductor as result markets. prior million by currency exposure second eliminated from offset year currency a cash our million XX.X% price. million. in from benefited the respects semiconductor reduction the a million a in optical from adversely expense EBITDA of incentive Strong in ago, relative on dollar in of X in shares incentive sales of changes. and ago. we noted, XX% plan. of demand sales incentive adjusted compensation organic comparison paid has EBITDA expenses will on despite aerospace, reduction a As second million nuclear In $X period, share million fluctuation overseas was X cash adjusted result filters. had as from foreign last elaborate balances aggregate the share rather driven year-over-year. price a lessen quarter. during share second XX.X% than repatriation of U.S. in a year the significant increased quarter Reported TSR material XXXX year the price-driven swing in the in $XX factors of the primarily all been share million in largely of $X The in $X.X a segment million another year-over-year Corporate and a of incentive, holdings. our to expense eliminate by by bit quarter were will combined commercial adjusted to were higher markets be $X The increased and of million in compensation XX.X% for or component long-term a share XX.X% off incremental flat benefit quarter the compensation. from will rise EBITDA We share the price-related price year EBITDA relatively in incentive plan, quarter just was currency-related period. down from year of from a earnings incentive the driven execution. next in diluted compared impact that share approximate compensation over factors $X solid cash year, from in and which adjusted related last per I decreased second year-over-year $X gradually expense pricing year's million negative Adjusted XXXX described. Adjusted affected $XXX.X compensation $X.XX XX% the in The reduction incurred on these impact. the the of the over total that per quarter share per the in expense compensation prior $XX.X The $X to roll price-driven decreased XX from compensation sales addition and by and vehicle share months expense actions incentive $X.XX the $X.XX to Total with over margins

firm than driven Sealing quarter, in performance. segment more of discussion our with energy demand a XX%, nuclear million increased a strong aerospace, see vehicle demand Technologies sales to $XXX.X pricing. continued and markets, to of positive we impact the by industrial commercial markets. from Moving general along in In

XXXX foreign Excluding the increased business the the XX.X%. exchange and fourth translation, sales of of impact divested quarter in

effective EBITDA For just XXX more growth and XX%. the basis favorable our adjusted pricing points to than EBITDA in adjusted commercial under Strong operational the mix, second and the vehicle volume in nuclear were EBITDA margin demand segment increased segment business quarter, aerospace primary and -- strategies segment drivers businesses, performance. of million across efficiencies adjusted our particularly $XX.X expanded of XX% solid and and

impact and of exchange to the foreign segment the more increased period. than divestiture XX% translation, the prior compared adjusted Excluding year EBITDA

Technologies. Surface Advanced to now Turning

filter XX.X% by semiconductor of and, million the sales slowdown quarter optical current decreased a to $XXX.X lower sales. Second markets lesser extent, driven in

the period. translation, impact XX% Excluding the year of decreased versus sales foreign exchange prior

segment adjusted and unfavorable by earnings and lesser decline mix to extent, volume investments. a driven $XX.X million in XX.X% the quarter, the decreased the For to impact EBITDA of growth

adjusted decreased Excluding EBITDA foreign XX.X%. translation, exchange segment the impact of

on second quarter, in in result an EBITDA the margin light of in segment expansion. update across U.S. participation the For achieved the weakness our a we XX%, chain. adjusted brief AST One strong current semiconductor supply Semiconductor the of

basis. purchased staged build continue out Act of facility help We on the Arizona which an state-of-the-art semiconductor a are in upfit building expedited us would CHIPS the we support seeking and

available account our late leverage $XXX.X net with cash to and cash. flexibility now We availability the and the we nearly July, Turning execute to on our pro million of Subsequent quarter $XXX quarter, Loan full a credit cash under million ample long-term Taking second and our into growth million of Term end short-term revolving to we have flow. the of investments this financial exceeding forma with A-X sheet facility, ended in strategic repaid with X.Xx. initiatives. $XXX balance the ratio

Our cash free significant foundational flow. generated has portfolio

offset months taxes year. was the the in driven interest net higher up period payments million, cash X and $XX flow higher and more by paid The more of support cash period prior from increase spending strong capital cash company generation XXXX flow to first in year-over-year the which across for projects. cash efficiency than $XX the than free the For growth million same free lower in was and

for to X million. months note we paid before and year, additional During second guidance. totaled quarter, $X.XX the first payments per quarterly moving of the One share dividend the a $XX.X dividend

interim of to in the test our of of a to a fourth The AST organic Alluxa goodwill was quarter exceeding the leading-edge the which coating over and margins footing and optical we $XX.X variety of quarter remains to recognized total growth averages. provider single-digit multiyear with with well Based high of upon on expectations of quarter. Alluxa optical noncash an results segment business remaining solve impairment required solid adjusted updated needs is EBITDA capabilities in us applications. below goodwill filters balance expectations, customers' million attributed in Alluxa's Second analysis, perform demanding were a results and differentiated of charge of XXXX with of determined the leading period Acquired was company for impairment. most impaired that Alluxa an a

Moving our guidance. XXXX to now

compared to be the expense million. be in of in primarily range We EBITDA to the expect of and the the last revenue $XXX decline the million end due share EBITDA to price adjusted the at second range is compensation $XXX discussed earlier. million quarter year incentive impact of to top $X adjusted to relatively flat related The as

to $X.XX long-term of raising We the earlier due diluted portion $X.XX share guidance balances. adjusted to range and of are on per cash debt a income interest our of primarily earnings noted to a repayment higher

$XX Our in is Sealing latest XXXX expectations stronger $XX down view assumption results results previous net million full to we expense offset lower our to interest to Advanced $XX is Surface ago, from Compared year in million which of by Technologies. million. quarter million Technologies expect $XX a for

in As move moderate today. Eric to markets we we the fourth for back mentioned, now market this second anticipate call now expect semiconductor closing And we comments. half. Thanks time your the of had based on mix inflection input and Eric to Sealing the the updated benefits turn first in that exceptional Technologies, quarter forecasts, I'll from to XXXX. half In the customer year for will point in

Eric Vaillancourt

Thank you, Milt.

driving execute strategic forward customers. Our to teams our steadfast and for high in level our continue a and remain delivering priorities at

execute deliver continue as improvements on are Looking development current through proceeding anticipate ahead, in positioned multiyear organic in opportunities and we navigate capitalize are semiconductor, our of product solutions continue noted, we that investments and to demand comprehensive Sealing, growth a efficiency will our which while on XXXX. our market over we building with well we strong will using variety continue a our time. AST, to to in we headwinds to well we prudently and to advantages technology look customers. positions acquisitions considering critical for In value-added new momentum broaden as and period, in technological exciting Over strong abate the expect very

I quarter, us accomplishments am team EnPro industrial technology As would your do we strategy technology our purpose. to said execute for company Thank and to today. empowering that what we to continue we many do,, you. on to open every I'm our our questions. joining and multiyear while EnPro, interest share of proud drive align the forward leading is a call grateful for I'll as with appreciate We you Thank in

Operator

Jeff of line the from comes with question Hammond first KeyBanc Our Instructions] [Operator Markets. Capital

Jeffrey Hammond

help wanted the get semi or Maybe Is bottom? on on just the in color of us And the expand of softness to kind a second you're the still more Just AST? incremental write-down. half. XQ shape specifically then little with where seeing Alluxa

I over the one. seem doesn't far think this the business kind about second just of that the It been you've how off long is from thinking term.

Eric Vaillancourt

start... I'll

Milt Childress

Yes, I'll start, Jeff.

you reported. guidance a view. to all, as changed that been expectations comments companies have industry So when a semiconductor, it's first in you'll point that's data the quarter what's large look inflection that guess, in at, shifting not from of ago, the in slight for we -- the semiconductor mentioned there's see from right earlier, our I It's just and

inventory semiconductor Alluxa impact of with with markets the year industry that some And one just we've us so had Alluxa, the the and as destocking semiconductors serving moderation of of have been reflecting a also the business the markets for of is the the The the as on dynamics comments optical is situation in second on that. affected the well, single largest the has is an past. Alluxa half number mentioned filter that in for

this good a some did business, year. for impairment, we the at is expectations flat compared this bounce relatively that it's really business back expecting were so for to our we goodwill year And time but previous stronger our growth

XXXX see that So of determined and and We in kind we that with that is business growth that the balance get beyond. just the of and goodwill in recognized it, dealt we behind we'll impaired. us, and good we

Jeffrey Hammond

growth just on then think in Sealing, the there, And half. you previously double-digit built some had I in slowdown first Okay.

you are still think benefiting out it of mix they're Sealing? Just about driving areas you point seem And seems strong. in -- do how kind growth organic like all that better then like the

the what's second of the mix informing favorable into kind So less half?

Eric Vaillancourt

Jeff, some industrial. just softness Eric. it's expecting We're Yes, in general

when leading to at be freight. But same always at bit time, look strong. a have Their I still the miles, all we is be continued we little ton book-to-bill about softer a Our to hear the it indicators bit. down continue FTR. little at look

expecting time. we're over our in softness so And industrial some general

businesses, The to still strong. expect other be we

Milt Childress

point of in second just comes our -- of The and expect example, when year some is have shipments, in that make I one timing it that overall first continue sequence based business outlook shipments but to nuclear orders would the the and added and for on nothing the half patterns, stronger nuclear half. rate the we changing that's the expected with to expected a of versus

a mixed And so comment. that's

happening the that indicated to we're see recovery flattening quarter ago, expecting the third some thought market. A semiconductor to addition QX we'll add, just of see look will I of in given In some QX. the you the half general views quarter the be recovery, relatively fourth had year, second industrial the we Jeff, an and equal. current quarter on at that assumption we also we the would that points being with if QX, low

sequencing thing would QX in I point only the and the terms that's QX. of of out So that

Eric Vaillancourt

total the expect segment plus little or for XX% to we year, approximate But a margins bit. minus probably

Milt Childress

In AST.

Eric Vaillancourt

In AST.

Milt Childress

Yes.

Jeffrey Hammond

company. about a well, comment that as XQ's balanced And not the XQ, AST total

Milt Childress

That's total company.

If you relatively company the total equally and look at second split of QX the being year. QX half for

Operator

[Operator from Ferazani with Company. Instructions] of Sidoti the is Our next line Steve & question

Steve Ferazani

call. all on the the Appreciate color

terms little strength of of volume break out terms mix. can of pricing you the that in on the a In bit performance Sealing, margin,

Milt Childress

Yes.

that second growth XX% in roughly was that Sealing you about of was about XX% If pricing of organic and XX%, look is year-over-year volume. impact the the at quarter, that the of

organic volume growth. good still So

in the what volume you or of do If you segment. the Sealing gives X.X% math, growth that thereabouts

else of Jeff's I yesterday previously soften have half, what second anything mentioned of So question some -- or if from favorable we mix, then really at mix, And expecting we add nuclear are to I to I'm question. not and to for sure in particularly the looked the the maybe us.

on up little a is thing other just price. half, we'll be in catching bit The the second

And the compared half pricing in to impact will so first of half. the second lessen the year-over-year

Steve Ferazani

commercial as get markets pricing how and the potentially if it's little have I see we think earlier, next aftermarket. slow. if to a I'm ease a trying slowdowns I know it's on we get Say, expect year, you your transportation. feeling bit sticks some inflationary we as for a and into -- of know pressures significant you much your

Eric Vaillancourt

or trucking heavy-duty overall? the Specifically,

Steve Ferazani

could. if Both, you

Eric Vaillancourt

think Heavy-duty pressure typically margins I trucking, truck hold but that hold our the up. pick And I think heavy-duty -- that. general, In well, me any more we aftermarket will Garlock on little well. to I overall, stick. say, very likely don't OEMs, a will It let erode. will most see get from and business, we'll for also of Technetics to those reason

And little much. a bit expect we'll I It'll to bit tough of little with hold most it. not so down be but OEMs, a

Steve Ferazani

commented Great. on bit you Appreciate you like you to an expedite provided -- were that? facility, the breaking on Arizona it. the trying sounded progress. up update probably Milt, repeat little were to you you It me. Can a

Milt Childress

we're pursuing up-fitting Yes, year. Chips we well, the last point the the purchased in to was that Act support expedite major order facility of

Steve Ferazani

you Any expedite it out the ahead of any want of just Do time? to done expect reason faster? kind benefit Or to it? from you build get

Milt Childress

would and customers sure make we're for that. everything wanted that can we're that we Act process. with do we -- ready coordinating be Well, Chips And to helpful we're support, our obviously, in to just

Steve Ferazani

how Obviously, seeing sheet How picked usage flow receivables -- you're can bit. towards Last again, paydown? We're that you one, you shape, thinking a about, XXX% was back cash are how And Great. little like thinking one for looks besides great very collection balance cash you conversion you debt is in getting that are me. about strong. conversion, rate? up the maintain

Milt Childress

cash of compared on to second in half. the pace half flow a the year from Yes. perspective anticipate first we'll the We stay that

going least at we're code be will yes, income. or in net the be same as vicinity ZIP So adjusted to it or at

is characteristic It's new years, So was as -- foundational looking one our portfolio. a a really our of flow-generating of a portfolio at reshaping which few company. we strong and conversion rate, things we had past in that cash more the were good over the dependable stronger mind

Steve Ferazani

And other your based timing debt how timing expecting guidance guidance cash downs and on that -- cash? on and uses beyond based pay uses of on you're of

Milt Childress

our noted of of the Well, we repaid I September to Loan Term of had year end of that the next -- at that subsequent 'XX. A-X quarter, a Yes. end maturity the

position The our to debt liquidity So for XXXX pay saw term we down. to just reasons, go pay decided and cash that a we ahead give reason to has that date. down. remaining maturity And no

additional So we down pay we're have to investing more don't investing, expectations focused for on growth. debt, currently

we're and as as capital evaluating opportunities businesses growth so for an our that to evaluating And support fit we're options standpoint. inorganic out, day obviously in in well day both investing might from

Operator

question-and-answer the remarks. At we've I'll closing the of this over the reached turn to time, session. Mr. end for Gentile call

James Gentile

Thanks thanks great, great Have a your a everyone interest have in -- day, EnPro. for everyone.

Operator

conference. will you participation. Thank for today's your This conclude

now your You time. at disconnect lines this may

EnPro Industries (NPO) 8 Aug 232023 Q2 Earnings call transcript